For weeks, I’ve been fielding questions from taxpayers who were hoping to have their stimulus checks applied to pre-paid debit or benefits cards. That is the case for some taxpayers, but most taxpayers have only two options: direct deposit or paper check. Both of them require access to a bank account or a check-cashing service.
There’s just one problem: not all taxpayers have bank accounts.
According to the Federal Reserve, there were 55 million unbanked or underbanked adult Americans in 2018. That’s about one in five U.S. households. Unbanked adults are those who do not have bank accounts, while the underbanked are those that may have a bank account but also rely on an alternative like a check cashing service, payday loan, or tax refund advance loan.
There are many reasons why folks might not have a bank account. Some of those reasons include lack of access to a physical bank location in their neighborhoods, or access only to banks with onerous fees or too-high amount balance minimums. There are also technological obstacles since some online banking requires additional authentication tied to mortgage or credit card accounts.
The Internal Revenue Service (IRS) can’t fix that for all Americans. But you can tell that it’s on their mind. Now, appearing on the Economic Impact Payment (EIP) page on the IRS website is the following note:
It says, at the bottom:
Also, visit the FDIC website for information on where to find a bank that can open an account online and how to choose the right arrangement for you.
The link takes you to a page on the Federal Deposit Insurance Corporation (FDIC) website focused on “Receiving IRS Economic Impact Payments.” The page, clearly built for the pandemic, offers information about ways to open an account – online or through a mobile app – without going to a bank branch. It also provides other information for consumers, including how to choose a bank account and how to provide your new bank account information to the IRS.
The FDIC also offers advice about what to do if you are unable to open a new account. That may happen because you have unpaid overdrafts or other negative information from banks and credit unions, which resulted in a previous account being closed. And just as a negative credit report can hurt your ability to borrow, a checking account history that shows a closed account can impair your ability to open a new account.
But that doesn’t have to be the end. According to Luke W. Reynolds, Chief of the FDIC’s Outreach and Program Development Section, “An FDIC survey indicates that one in five banks offers accounts that give an option to some consumers unable to open a regular checking account.” And while second chance accounts generally have higher fees and more restrictions than traditional accounts, they are still less expensive and more convenient than the alternatives of paying check-cashing and money-order fees.